The "New King" of Berkshire Takes the First Step: $8.5 Billion! Selling Oil and Gas, Buying Real Estate

Berkshire Hathaway is actively defining its post-Buffett era investment style—significantly trimming its high-level holdings in Chevron and instead making a bold $8.5 billion bet on the U.S. housing market.

According to a Wall Street Journal report on the 31st, Berkshire has agreed to acquire U.S. homebuilder Taylor Morrison in an all-cash deal at $72.50 per share, representing a premium of about 24% to the stock’s closing price last Friday, with an equity value of approximately $6.8 billion and a total enterprise value of $8.5 billion when including debt. This is the first major acquisition executed by new CEO Greg Abel since he succeeded Buffett in January this year.

At the same time, Berkshire reduced its Chevron holdings by about $8 billion in the first quarter, cutting its stake in the company by roughly one third.

The two maneuvers together clearly outline Abel’s asset allocation preferences: realizing gains in the energy sector at a high point and reallocating capital towards the cyclically recovering housing industry. This combination strategy is expected to revitalize market confidence—Berkshire’s Class B shares have fallen 28% in the past year, as investors previously remained on the sidelines regarding the management transition.

Abel officially took over as CEO in January this year, about six months ago. Sources say that Abel, through an advisor's referral, proactively reached out to Taylor Morrison CEO Sheryl Palmer this spring and pushed the negotiations towards completion. The deal is expected to close later this year, and Palmer will remain with the company after the transaction.

Abel stated that Taylor Morrison will eventually integrate with Berkshire’s Clayton Homes, "allowing us to help more Americans achieve the dream of homeownership." This statement grants the acquisition a clear strategic rationale—building a more comprehensive housing industry chain by integrating housing-related assets under its umbrella.

At this year's earlier Berkshire shareholders’ meeting, Abel publicly stated that the company had listed acquisition targets and emphasized that "market dislocations will provide us with opportunities to take action." This quick move is being seen as evidence of Abel fulfilling his promise and demonstrating his execution capability in mergers and acquisitions.

Taylor Morrison is headquartered in Scottsdale, Arizona, with operations spanning 21 markets across 12 U.S. states and revenue of $8.1 billion last year. In addition to traditional home development, the company operates rental communities under the Yardly brand and provides clients with mortgage and other financial services.

This acquisition comes at a time of moderate recovery in the U.S. homebuilding sector. According to the National Association of Home Builders (NAHB), single-family housing starts in the U.S. will see modest growth of 1% this year to 940,000 units, with a further 5% increase expected next year to approximately 984,000 units.

Berkshire is no stranger to this sector. Previously, the company already held shares in Taylor Morrison’s competitors DR Horton, Lennar, and NVR, and owns paint manufacturer Benjamin Moore as well as roofing and insulation materials maker Johns Manville. Acquiring Taylor Morrison directly further deepens its existing industry layout.

In addition, the homebuilding industry is a focal point for the Trump administration as it advances housing affordability issues ahead of the midterm elections. Taylor Morrison has participated in discussions of a federal "rent-to-own" program designed to help more Americans enter the housing market and clear inventory overhang—offering some policy tailwind to the deal.

Just before and after the Taylor Morrison acquisition announcement, Berkshire sold about $8 billion of its Chevron shares in the first quarter, reducing its stake from about one third to 4.2%.

According to regulatory filings submitted by Berkshire on Friday, the company remains Chevron’s fourth-largest shareholder after the sale. Bloomberg data shows the average sale price during the reduction was $182.59 per share.

This March, Chevron’s stock price reached a historic high amid turmoil in the Middle East and soaring oil prices, giving Berkshire an ideal exit window. Berkshire first bought in at around $65 per share in 2020, increased its position to about $124 per share around the outbreak of the Russia-Ukraine conflict in 2022, and this time sold at an average price over $182—resulting in considerable cumulative gains.

The deeper significance of this deal lies in the renewed scrutiny over Berkshire’s massive cash reserves. As of the end of Q1 this year, Berkshire’s cash and short-term U.S. Treasury holdings reached a record $381.1 billion.

In Buffett’s final years in charge, the pace of M&A activity clearly slowed. In October last year, Berkshire acquired Occidental Petroleum’s OxyChem division for $9.7 billion, when Abel was still CEO-in-waiting. In the first quarter of this year, the company also established a new $2.6 billion position in Delta Air Lines shares.

Abel reiterated the company’s M&A philosophy in his first annual letter to shareholders this year: "Major investment opportunities can be shared with us in confidence and will receive a quick response." He also emphasized that a large cash reserve does not mean an exit from investing—the company will remain patient and disciplined in seeking truly suitable opportunities.

The market generally believes that Abel completing this major deal within six months of taking office will enhance the probability of Berkshire making further use of its cash reserves and accelerating its pace of acquisitions. In this transaction, Goldman Sachs and Moelis acted as financial advisors to Taylor Morrison, Simpson Thacher provided legal advice, and Gibson Dunn served as legal counsel to Berkshire.